Social Capital and the Terms of Trade for Farmland

Lindon Robison, Robert J. Myers and Marcelo E. Siles

Review of Agricultural Economics, 2002, vol. 24, issue 1, 44-58

Abstract: Social capital is a person or group's sympathy for or sense of obligation to another person or group. This article introduces social capital into a neoclassical model of farmland exchange and shows how relationships alter the terms of trade. Empirical evidence from a survey of farmers shows that the type of relationship farmland sellers have with farmland buyers has a statistically significant and economically important effect on the minimum-sell price for farmland. Compared to the minimum-sell price when selling to a total stranger in an arm's-length transaction, farmland sellers discount prices to friendly neighbors and relatives and require a premium from unfriendly neighbors and influential people in the community.

Date: 2002
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